Yatani to draw lessons from Uhuru as he presents first budget

When he walks to the National Assembly to read the budget estimates for 2020/2021, Treasury CS Ukur Yatani will set a precedent as the first Finance chief in the history of the country to present a budget that is less than the previous year.

Due to the coronavirus pandemic, Mr Yatani will also be accompanied by the leanest team ever to his first budget presentation.

The team includes National Treasury PS Julius Muia and not more than three officers from his ministry.

Whereas the budget for the 2019/2020, which ends on June 30, was Sh2.8 trillion, CS Yatani will be presenting a budget of Sh2.73 trillion, which means that we will spend about Sh100 billion less in the next financial year.

SUSTAINABLE

“We have been spending more than we are able to generate. It can no longer be sustainable,” Mr Yatani said Monday during an exclusive interview in his office at the National Treasury headquarters.

This honesty, which cost former Finance Minister Simeon Nyachae his job when he openly told a meeting of MPs in 1998 that the Kenyan economy was in the Intensive Care Unit, is what Ambassador Yatani is trying to bring back to an office that had become synonymous with cooking books , over-borrowing and over-spending.

Since he took office in acting capacity almost a year ago from Mr Henry Rotich, the soft-spoken Yatani, who rarely smiles for more than a few seconds, has a knack for saying no.

While his predecessor was a man who found it hard to say no as he led the economy on a borrowing and spending spree, Mr Yatani is charting his own path.

Coincidentally, the route he has chosen is inspired by President Kenyatta, who when serving as Finance Minister led the recovery of the economy from the shocks of the 2007/2008 Post-Election Violence (PEV) that slowed the growth of the economy significantly.

“[President] Kenyatta introduced a stimulus package, austerity measures and diffusing resources to the lowest levels of government so as to spur economic growth and, through it, managed to create jobs and revitalise the local economy,” the CS says. He now finds himself in a similar predicament.

EXTRAORDINARY INTERVENTIONS

“The only difference is that the post-election violence lasted for a few months, whereas we don’t know for how long the coronavirus will last before it is controlled,” he offers.

Reminiscing crises that require extraordinary interventions, he points out that the 2020/2021 budget seeks to prioritise job creation, youth empowerment, supporting manufacturing, improving food security, enhancing health coverage, and enhancing living conditions through affordable housing.

“This is an optimistic budget, which comes amidst a crisis. We have to give people hope that we will rise again,” he added.

Comparing Kenya to other economies, he insists that the country is well-insulated from adverse economic ruin due to diversification of the economy.

“Countries that are over-reliant on sectors like tourism and oil will take a beating for some time. But Kenya has a fair chance due to the diversification of the economy,” he says.

In the proposals, the total expenditure and net lending is estimated at Sh2.7 trillion with recurrent expenditure amounting to sh1.8 trillion, while development expenditure is estimated at Sh584.9 billion.

The post-Covid-19 Economic Stimulus Programme is estimated to cost approximately Sh53.74 billion.

“We’ve revised the Budget Policy Statement, which we presented to Parliament in February because it was done before the coronavirus pandemic hit us. The economy requires a different approach from the one we had in February,” he opens up.

CUSHION THE POOR

He cites a number of strategies that will help the Kenyan economy recover and shield its people from economic shocks.

First, the National Treasury is working to cushion the poor and vulnerable groups through provision of food rations, stipends and supply of water.

Second, the government is helping businesses from further economic ruin through an economic stimulus package, which includes temporary suspension of adverse listings in the Credit Reference Bureaus for Micro, Small and Medium Enterprises (MSMES) and corporate entities where loans fall overdue or in arrears.

Third, there are efforts to increase liquidity in the economy through fiscal interventions that range from VAT refunds, lowering of the Central Bank Rate (CBR) by 1 per cent to 7.25 per cent and lowering of the Cash Reserve Ratio (CRR) by 1 per cent to 4.25 per cent.

Mr Yatani estimates that the government will forego about Sh172 billion due to the tax incentives initiated so as to support businesses.

Already, there is a feeling within the National Treasury circles that reforms initiated by the CS are inspiring confidence in the economy.

BUDGET SUPPORT

In its April World Economic Outlook Report, the IMF ranked Kenya as the third-largest economy in sub-Saharan Africa, behind Nigeria and South Africa.

East Africa’s largest economy surpassed Angola to become the third-largest economy in dollar terms.

Last month, Kenya received its biggest loan ever after the World Bank approved Sh106.8 billion for budget support.

The approval from the World Bank’s Development Programme Operations fund comes 14 days after the International Monetary Fund approved a Sh78.9 billion loan to “address the impact” of the Covid-19 pandemic.

“It is important to note that these loans are given based on 13 conditions which we have to meet. This was the first time in many years that the county was receiving a loan from the multilateral lenders without a single objection,” Mr Yatani said.